Q: What are the criteria for a small company to have an IPO (initial public offering)? I would imagine the company needs a positive track record and a certain amount of assets, but beyond that, I don't have a clue.

A:Eight years ago, during the height of the dot-com boom, it almost seemed like you could take your kid's lemonade stand public (as long as it was called Lemonade.com). Companies were going public with no profits, sometimes no revenues, and with CEOs who were barely out of college.

Much of that has changed. There are still sectors where investors don't demand immediate profitability, such as biotech with its long development cycles for new drugs.

But on the whole, companies today have to jump some high hurdles to go public on the main American stock markets such as the Nasdaq or the New York Stock Exchange.

Companies typically spend at least $100,000 and often more than $300,000 on legal and accounting fees for an IPO, according to Robert Heim, a New York attorney and author of "Going Public in Good Times and Bad."

The Sarbanes-Oxley Act "has dramatically increased the costs that smaller companies have to incur once they're public," Heims said. "The minimum a public company spends on (annual filings) today is about $50,000 for a small company."

"But the other answer is that it all depends on what the market wants that day and year," Kedrosky said. "It's fundamentally no different than selling jeans. The manufacturers sell whatever style of jeans the public wants, and the proxy for the public here is the investment bankers."

Ben Davey, a managing director at ThinkEquity Partners, a San Francisco investment bank, said his firm looks at more than just numbers in deciding to take a company public.

"We use a qualitative screen of the 'Four P's,' " Davey said. "People, product, potential and predictability. How big is the market? What does the competition look like? Does the company have a track record over time? The perfect situation would be a company with huge revenue growth and huge margins, but (if one is lacking) you can trade off one against the other."

The median IPO last year was a $100 million offering for a company with a total valuation of about $300 million, according to Davey. Only about 12 percent were offerings of $30 million or less, by firms with valuations of less than $50 million.

"Typically you see market valuations of $100 million or more for going public on a national exchange," said John Schneider, assistant head of investment banking at WR Hambrecht in San Francisco.

The vast majority of American small businesses raise capital in other, less sexy ways -- through loans and investment by friends and family, for instance, or through SBA-backed bank loans.

Want more information on what's involved in taking a company public? Entrepreneur magazine has a useful article at www.entrepreneur.com/growyourbusiness/howtoguides/article81394.html .

Q:I am an electrical contractor who until recently worked alone. But I've been getting much busier and in the last few months had to hire three employees. Despite being busy, I feel as if I'm almost losing money because of all the new expenses involved with employees. Someone told me that for a small business to make money, the owner needs more than eight employees. Is this true? Is there a formula I should know about?

A:Maybe the person touting that eight-employee formula did the math for his own business and found he had a break-even point with eight employees.

Working alone, you may have had an instinctive knowledge of how long it would take you to complete certain tasks. With employees, you need to think through the time and cost of projects more carefully.

"As you start to add people, you need a better mechanism for tracking what it really costs you," said Vicki Suiter, a small-business consultant with Suiter Financial Systems in Novato who has numerous contractors as clients.

-- Have your estimates been on target? "Go back and look at every part of a job and ask, 'If I thought it was going to take five hours, did it really take 10?' " Suiter said.

-- What is the real cost of your employees? This goes beyond wages to include the employer's share of payroll taxes as well as workers' compensation, liability insurance and benefits such as health coverage.

"A really large framing contractor might add 35 percent. A roofing contractor might add 100 percent because the workers' comp and liability insurance are insane."

-- Do your estimates include overhead -- such as the time you're suddenly spending on hiring, supervising and handling payroll for these employees? And are you also including a profit margin for yourself? Suiter suggests that contractors factor in 20 to 25 percent for overhead and another 10 percent for profit.

You should take this into account when you estimate the cost of a job. At the same time, with attentive management you may also be able to improve their productivity.

Suiter also covers these issues in workshops, including one on "Five Critical Steps to Business Success" at the San Francisco Small Business Administration April 17. See suiterfinancial.com/events.html.

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